Overview of the Policy Change
China’s tax authorities released 国家税务总局公告2026年第19号, an announcement setting out the template and requirements for the new VAT & surcharge withholding declaration form concerning natural persons’ VAT by domestic entities. This follows the related “Management Measures” (公告2026年第28号), defining when domestic units acting as payers must withhold VAT from natural persons.(fgk.chinatax.gov.cn)
Effective Date & Scope
- Effective Date: November 1, 2026.(fgk.chinatax.gov.cn)
- Scope: Domestic units (e.g. companies, institutions) that make payments to natural persons for services, goods, or other VAT-applicable transactions must now withhold VAT and surcharges. They must use the new declaration form titled "境内单位代扣代缴自然人增值税及附加税费申报表" plus attached supplemental material.(fgk.chinatax.gov.cn)
Key Requirements & Filing Mechanics
- The declaration form covers:
- Basic payer (扣缴义务人) information: name, taxpayer identification (统一社会信用代码), period of withholding.(fgk.chinatax.gov.cn)
- Details of taxable transaction with natural person: amount, tax base, applicable VAT rate.
- Calculation of the VAT and surcharge tax, e.g., urban maintenance and construction tax, education surcharge, etc.(fgk.chinatax.gov.cn)
- Supplemental attachments (附列资料) specifying surcharge breakdown.
Practical Impact & Advice
- Domestic businesses that contract with freelancers, consultants, delivery workers, or even purchase services from individual persons must updated internal accounting, payroll, and awarding contracts to capture VAT withholding obligations.
- Natural persons should ensure invoices are issued correctly and identify the unit withholding them to keep transparent records for their own filings.
- Entities must adapt their accounting systems/software to generate this new form and ensure payments align with withholding schedules.
- Non-compliance may lead to audit risk, penalties, or interest charges for late remittance.
Broader Context
This measure is part of China’s ongoing VAT Law reforms, streamlining how VAT interacts with individual service providers and ensuring the tax net covers high-volume transactions that were under-reported in the past. Advisory firms like Deloitte observe this also helps with fairness in tax administration.
Summary
The new withholding and reporting form kicks in on November 1, 2026. For employers and payers, it's time to revise contracts, implementing clear VAT withholding with natural persons. For self-employed individuals, retaining proof and clarity around payments is more important than ever.